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Home » Economy » Global recession to be triggered by COVID19, warns Morgan Stanley, Goldman Sachs

Global recession to be triggered by COVID19, warns Morgan Stanley, Goldman Sachs

Morgan Stanley reiterates China to see its worst economic performance in the current quarter, and the rest of the world, in the coming quarter

By Newsd
Updated on :

On Tuesday, Global investment bank Morgan Stanley sent warning bells as the rapid spread of Covid-19 has finally hit Europe and the US after hitting Asia, the fluctuation happening right now to the economy and markets will sure impose causation for global growth to contract in the first half of 2020.

“We are sure that 2020 global growth will dip to near around 0.9 per cent year-on-year, the lowest since the global financial crisis when global growth bottomed at -0.5 per cent in 2009.

This time it can be far worse than the global recession of 2001,” says, Morgan Stanley chief economist Chetan Ahya.

The policy response will be providing some amount of downside protection, the underlying damage from both Covid-19’s impact and tighter financial conditions will deliver a severe shock to the economy, Ahya and team said in the note.

Morgan Stanley reiterates China to see its worst economic performance in the current quarter, and the rest of the world, in the coming quarter.

The bank has forecasted China’s growth to minimise at a -5.0 per cent year-on-year in the first quarter before rebounding a bit in the second quarter.

Morgan Stanley’s prediction however for the United States remains the same as it expects a near around 4 per cent contraction in the second quarter and a slow recovery from the third quarter of 2020.

The developing markets, however, are sure that, Eurozone is expected to see the most downside with full-year growth contracting at -5 per cent.

“With such impending recession risks, the G4 plus China will expand their primary fiscal deficit by 200bp in 2020. We think combined monetary and fiscal easing will help to revive the global economy from 3Q20 (third quarter of 2020), while a contraction in YoY (year-on-year)growth in 1H20 will still be inevitable,” the note says.

Morgan Stanley has warned that if the disruption from Covid-19 persists into the third quarter of 2020, the recession can affect deeper, with full-year global growth averaging approximately around -0.6 per cent.

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